In early January 2010?, you purchased ?$19 comma 000 worth ofsome? high-grade corporate bonds. The bonds carried a coupon of 74/8% and mature in 2024.
You paid 95.463 when you bought the bonds. Over the five yearsfrom 2010 through 2014?, the bonds were priced in the market as?follows:
| Year | Beginning of the Year | End of
the Year | Average Holding Period Return on High-Grade Corporate Bonds |
| 2010 | 95.463 | 104.824 | 7.30% |
| 2011 | 104.824 | 106.783 | 11.72% |
| 2012 | 106.783 | 108.567 | -6.89% |
| 2013 | 108.567 | 116.281 | 7.90% |
| 2014 | 116.281 | 128.181 | 9.11% |
Coupon payments were made on schedule throughout the? 5-yearperiod.
a. Find the annual holding period returns for 2010 through2014.
b. Use the average return information in the given table toevaluate the investment performance of this bond. How do you thinkit stacks up against the? market? Explain.
a. The holding period return for 2010 is nothing?%. ?(Round totwo decimal? places.)
The holding period return for 2011 is nothing?%. ?(Round to twodecimal? places.)
The holding period return for 2012 is nothing ?%. ?(Round to twodecimal? places.)
The holding period return for 2013 is nothing?%. ?(Round to twodecimal? places.)
The holding period return for 2014 is nothing?%. ?(Round to twodecimal? places.)
b. Use the average return information in the given table toevaluate the investment performance of this bond. How do you thinkit stacks up against the? market? Explain.???
The? high-grade corporate bond investment has outperformed themarket. The average rate of return for the investment is 13.21?%versus the average market rate of 5.83?%.
The market has outperformed the corporate bond investment. Theaverage rate of return for the investment is 5.83?% versus theaverage market rate of 13.21?%.
